There was a fabulous article in the May 19 edition of "The New Yorker," headlined: "The Bribe: How the Mississippi Lawyer Who Brought Down Big Tobacco Overstepped." Yes, it's the incredible tale of Dickie Scruggs, who pled guilty a few months ago for trying to bribe a judge in a lawsuit over the division of contingency fees in a Hurricane Katrina suit. It was a disgraceful end to an audacious and amazingly successful legal career, in which Scruggs brought down corporate titans in asbestos, tobacco and insurance. The problem is that while the greedy, arrogant Scruggs went too far, what is the alternative for those with valid claims seeking top legal talent to make their case?
I'd love to link to the full story, but unfortunately the magazine only offers an abstract of the lengthy piece on its Web site. If you can get your hands on a copy, it's a compelling read. In fact, it would make a terrific movie. (It wouldn't be the first legal thriller featuring Scruggs, who was portrayed in "The Insider" about the landmark tobacco liability litigation.)
For your reading pleasure, I'll serve up some of the highlights, and my views on the subject. I invite you to share your take as well.
The author, Peter J. Boyer, notes that "although Scruggs is Mississippi's most famous trial lawyer, he never really was a 'trial' lawyer at all." In fact, Boyer quotes Bill Reed, identified as an attorney and one of the subject's closest friends, as stating that Scruggs "hasn't tried 10 cases to verdict in his life."
Instead, he is identified as "the master of the deal," using the threat of a devastating class-action judgment and years of negative publicity to force settlements.
While all is fair in love, war and litigation (as well as politics, for that matter), one problem is that the deck was often stacked when Scruggs went to trial, the article makes clear. Operating in a state with an elected judiciary, Boyer reported, "as settlement money rolled in, the plaintiffs bar began investing it in the campaigns of plaintiff-friendly judges. Lawyers would then shop for friendly jurisdictions."
Creating what the American Tort Reform Association decried as "judicial hell holes," but which were hailed by Scruggs as "magic jurisdictions," these kangaroo courts offered about the same odds for defendants as the Christians faced when the Romans forced them into the arena versus the lions. Indeed, about the only chance they had to survive was to run for their lives--offering massive settlements rather than face near certain death in court.
Scruggs made no effort to sugar coat this harsh reality. In the story, he is quoted as having stated the following at a 2002 panel discussion:
"The trial lawyers have established relationships with the judges that are elected. They're state court judges; they're populists," he said. "They've got large populations of voters who are in on the deal; they're getting their piece in many cases."
He goes on to describe such biased judges as "a political force in their jurisdiction," adding that "it's almost impossible to get a fair trial if you're a defendant in some of these places."
He conceded that "these cases are not won in the courtroom. They're won on the back roads long before the case goes to trial. Any lawyer fresh out of law school can walk in there and win the case, so it doesn't matter what the evidence or the law is."
Isn't that an amazing statement?!? At least federal class-action reform cleaned up part of that problem.
The author goes on to report that "Scruggs began to formulate his own brand of litigation, entrepreneurial and boldly speculative, of which the actual practice of law was only one part. The strategic manipulation of politics and public opinion was just as important to this enterprise," with Scruggs calling this his "three-legged stool."
"By exerting pressure at key points, he could see to it that defenses collapsed and opponents settled without a jury ever having a say," Boyer wrote. "He created a sort of floating legal syndicate, with changing players (only some of whom were lawyers) chosen as needed for a particular skill or connection."
There's plenty in the piece about insurers and Hurricane Katrina litigation--material with which you folks are painfully familiar.
No matter how you spin it, there is no denying that Scruggs and his ilk perverted the legal system to extort huge figures from companies and entire industries. However, I can't help but wonder what judicial system can adequately take the place of this corrupt and shameful process.
Complicating the issue is that the "victims" here were not exactly innocent. Tobacco companies for years buried evidence of health risks to smokers, then brazenly lied about it. Asbestos makers did a tremendous amount of damage to thousands of people.
As for insurers, while they certainly are not in the same league as tobacco or asbestos, not all have been entirely fair in their investigation and disposition of Katrina claims, and their policies are anything but clear on wind-versus-water damage.
Given these circumstances, the question is how might an average Joe or Jane get adequate legal representation to take on huge corporations when they have a legitimate claim?
While it's wrong for courts to be rigged against defendants, it's also not fair for individuals to face teams of corporate lawyers determined to stall and appeal even legitimate claims into oblivion.
The one part of the "New Yorker" article that got my sympathy dealt with the fact that Scruggs nearly bankrupted himself in the tobacco suits. When working on a contingency basis, the trial lawyer takes all the financial risk and foots all of the expenses up front--which can be quite a bill when a class-action is involved.
Sure, there was a huge payoff--maybe a billion dollars for Scruggs and friends, but that was no certainty going in. And as Nathan Detroit said in "Guys and Dolls" after Big Julie nearly took all his cash in a floating crap game--held, appropriately enough, in the sewer: "Since I assume all the risk, should I not also assume some of the dough?" Indeed, he should, and so should the trial lawyer who takes on a deep-pocketed defendant with substantial political connections of their own.
Without the contingency fee system, average claimants would be virtually defenseless, left at the mercy of ruthless corporations, their attorneys--and, yes, their insurers--even if they have a valid claim.
There has got to be a better way than the casino/lottery style of justice so pervasive today, but I can't think of one.
Can you? Let's hear it.
Comments (6)
Fine post, Mr Friedman.
I think one thing that would help on the state level is appointing rather than electing judges, which would remove a good bit of the politics from the system.
I also think tort reform should be repealed and the caps on damages lifted.
Allstate, for example, took a $25,000/day sanction rather than comply with a court order regarding production of the McKinsey docs in litigation in Missouri. It was only after Commissioner McCarty suspended them from Florida over the same issue that the monetary penalties became great enough to force Allstate to comply with these lawful court orders. No person or enterprise should be above the law.
The goal of our judicial system should be balanced justice, and right now the judicial deck is stacked against the common man in these type disputes, IMHO.
Posted by Sop81_1 | May 31, 2008 11:53 AM
Posted on May 31, 2008 11:53
Canada has a system where judges are appointed rather than elected, and the judiciary has rarely awarded settlements as large as in the U.S.A.
We see fewer frivolous lawsuits, and legal aid geared to income allows most to access legal representation. It's not perfect, but from this vantage point less corruption-prone.
Posted by Marc Dubois | June 2, 2008 12:26 PM
Posted on June 2, 2008 12:26
The prosecution of people like Mr. Scruggs goes a long way toward cleaning up the system. As is clear from the Wall Street Journal's Law Blog and other sources, the number of lawyers who act as unethically as Mr. Scruggs' conviction indicates, is large.
It takes government oversight, honest judges who turn in to the prosecutors lawyers who attempt bribes, and defendants willing to spend the money necessary to defeat spurious lawsuits.
If the money wasn't so easy to get in such large numbers fraud would wither and die. It is when insurers make the stupid conclusion that paying a settlement is safer and cheaper than defending a "bad faith" law suit that is spurious.
The tort of bad faith is unfair and violates, in my opinion, the equal protection clause of the U.S. Constitution. In that regard, see my article at http://law.lexisnexis.com/practiceareas/Insights--Analysis/Insurance/Barry-Zalma-on-Bad-Faith-Time-to-Put-A-Stake-Through-the-Heart-of-the-Tort-of-Bad-Faith
Until the phony "tort of bad faith" is done away with and insurers need only face breach of contract actions, people like Scruggs will continue to seek the enormous profits available from insurers who are afraid to take a chance that they may be assessed punitive damages.
Posted by Barry Zalma | June 2, 2008 12:57 PM
Posted on June 2, 2008 12:57
I, too, have no real answer to this conundrum other than, perhaps, an appointed judiciary, but what if the appointer's themselves are corrupt or "looking out for other interests than their constituents"?
As far as the Florida situation with Allstate, this must be kept in perspective. This is all a part of Gov. Charlie Crist's campaign to get selected Vice President. Florida is a BIG swing state and he is very popular primarily because of his insurance company bashing.
He is risking bankrupting the state government and have horrendous surcharges applied to virtually every policy in the state if a big storm hits us, to keep Citizen's homeowners rates admittedly artificially low. (They say it's a risk they are willing to take, even though Citizen's charter requires actuarially sound rates!)
Commissioner McCarty only went after Allstate because they, among many others, asked for big homeowners rate increases. But he only went after Allstate, not any of the others who requested increases. Why not justice across the board?
And does anyone really expect the Frlorida Insurance Department has the manpower to review the hundreds of thousands of documents they required Allstate to produce?
Crist and McCarty claim they are trying to get more companies to write homeowners business in Florida but this is hardly the way to do it. They have been successful in getting some new companies to take some business out of Citizen's, but, guess what, only by offering them state subsidies and letting anyone with $1.75 in the bank take policies out.
Citizen's itself has virtually no surplus, it is backed by something like $25 billion in bonding capability by the state, but the state's finances are so weak (we don't have an income tax, only a sales tax because they want the tourists to pay our expenses--but tourism is seriously down) that Alex Sink, Chief Financial Officer of the state, expresses serious doubt that the bonds can even be sold if needed, and if they are, they get paid for by surcharges on all the policies in the state except medical malpractice and workers' comp for many years to come.
And these surcharges get added to the surcharges we are paying until 2016 to pay for 2004 and 2005!
Sorry, but SOP81 brought Florida and Commissioner McCarty into the discussion, and I felt that that situation needed to be clarified.
One footnote: A recent survey showed that something like two-thirds of coastal Floridians are not prepared for a storm, most haven't even done any mitigation work on their houses--yet they scream for lower rates AND want insurers to pay for their damage!
Posted by Temblor | June 2, 2008 3:33 PM
Posted on June 2, 2008 15:33
If real oversight of corporations had the ability to be transparent and documented, then maybe the use of credit for insurance could be explained to everyone satisfaction instead of legal action or political action.
It's not and won't be, so finding out how claims are handled might be a historical adventure, but not a clear, current policy.
Posted by Joe Sanders | June 2, 2008 4:01 PM
Posted on June 2, 2008 16:01
Sam, with reference to the contingency fee system, you ask: "What is the alternative for those with valid claims seeking top legal talent to make their case?"
As it stands now, the contingency system is the only realistic system to use (in the absence of 'loser pays'--which we know isn't going to happen in the U.S.).
The problem is that the contingency system in class-action lawsuits has been bastardized. I'm not a lwayer, and am working from memory, BUT doesn't the first one to file the suit become "Lead Counsel" and entitled to the lion's share of the fees? Hence, the rush to find (or hire) 'aggrieved shareholders or customers' to be the first in line.
Again, from memory I believe there was a large class-action suit against a fast-food company. Some multi-thousands of customers were each rewarded with a coupon for $4.98 (NOT a typo}.
Due to the huge number of 'aggrieved' parties the total settlement was substantial, as was the contingency fee for 'Lead Counsel" (something in the neighborhood of $20 million).
SCORE:
Aggrieved parties $4.98 each
Lead Counsel $20,000,000.
I know that this is NOT atypical of class-action lawsuits, and from where I sit, the stench is overwhelming!
P.S. I know that we all get class-action notices in the mail. If I have ever owned a share of the target company, I am notified that my potential recovery is $15 (or something similar). Is this what the American system of justice has degenerated into?
Posted by James P. Reilly | June 3, 2008 2:07 PM
Posted on June 3, 2008 14:07